Reference no: EM132231190
DECISION TREE QUESTION - Not in Operations Mangement by Heizer and Render
A new paper machine is a very large investment for a company and a major break down of a paper machine may affect the possibility of a paper mill to survive. All production stops need to be planned for a long time to reduce costs for maintenance as well as minimize the loss in production.
When a maintenance stop is being planned the decision about when to exchange critical bearings in the paper machines is beneficial. Usually they exchange critical bearings every fifth year but usually, they work for more than that. So they have the following decisions to make:
1) Continue as before.
2) Do the exchange every sixth year instead.
3) Do an inspection with ultrasound every half a year, beginning year three.
4) An extensive continuous service from day one.
Probability of bearing defects is year one and two 0.01, 0.03 year three and four, 0.06 year five and 0.12 year six.
A cost for a production stops due to a planned exchange of bearings will be around $50,000 new bearings included.
Each inspection of the bearings will cost $2,000.
The continuous service program will cost $10,000 each year and will have a guarantee for four years on bearings causing $0 cost for exchange of a defect bearing
A cost for an unplanned production stop: $1,000,000
Questions
1. Make a decision tree for the different actions to be made.
2. Draw a conclusion about what you should decide and what the decision is based on.
3. Which decisions have the highest risk and which have the lowest risk? Where is optimum reached?